At a Glance
Firstsource Solutions (FSL) delivered Q1 FY26 revenue of ₹2,218 crore (+23.8% YoY) and PAT of ₹169 crore (+25% YoY). Margins stayed strong at 16%, boosted by a UK acquisition and healthy deal wins. Stock rose to ₹335 as investors applauded the digital-first momentum, even if competition is nipping at its heels.
Introduction
Imagine being a BPO player in 2025 – surviving the AI invasion, automation chaos, and clients asking for more at lower costs. Yet, FSL thrives, thanks to digital transformation services, healthcare outsourcing, and RP-Sanjiv Goenka’s deep pockets. This quarter’s numbers show the company can still hustle while keeping its dividend payout impressive.
Business Model (WTF Do They Even Do?)
FSL is not just a call center with funky chairs. It operates in:
- Banking & Financial Services: Credit management, customer care.
- Healthcare: Claims processing, revenue cycle management.
- Communications & Tech: CX services for telcos and OTT.
- Digital Transformation: Automation, analytics, AI-enabled BPM.
Global presence, sticky contracts, and a push toward Digital-First solutions make it relevant even in an AI-crowded market.
Financials Overview
- Revenue (Q1 FY26): ₹2,218 crore (+23.8% YoY)
- EBITDA: ₹347 crore (margin 16%)
- PAT: ₹169 crore (+25% YoY)
- EPS: ₹2.39
- ROE: 15%
- ROCE: 15.4%
Commentary: Strong growth, decent margins, and a dividend policy that doesn’t insult shareholders.
Valuation
- P/E Method:
- EPS ₹8.9, Industry P/E 30 → ₹270
- EV/EBITDA:
- EBITDA ₹1,285 cr, EV/EBITDA 15x → ₹350–370
- DCF:
- Growth 12%, WACC 9% → ₹320
Fair Value Range: ₹300 – ₹350
CMP ₹335 = fairly valued.
What’s Cooking – News, Triggers, Drama
- UK acquisition (Pastdue Credit Solutions) to expand BFSI footprint.
- Guidance raised for FY26 – management sees sustained double-digit growth.
- Automation investments = efficiency gains, but AI cannibalization risk looms.
- RP-Sanjiv Goenka’s backing ensures financial muscle.
Balance Sheet
| Particulars | ₹ Cr |
|---|---|
| Total Assets | 7,758 |
| Liabilities | 4,357 |
| Net Worth | 4,098 |
| Borrowings | 2,569 |
Auditor’s Quip: Debt is high, but with cash flows like this, creditors sleep peacefully.
Cash Flow – Sab Number Game Hai
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Operating | 795 | 644 | 701 |
| Investing | 17 | -57 | -744 |
| Financing | -743 | -563 | 23 |
Takeaway: Strong ops cash, but acquisitions make investing cash negative – expected for growth.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 15% |
| ROCE | 15.4% |
| P/E | 40.4 |
| PAT Margin | 7.6% |
| D/E | 0.63 |
Verdict: Healthy, but leverage could become a concern if acquisitions pile up.
P&L Breakdown – Show Me the Money
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 6,022 | 6,336 | 7,980 |
| EBITDA | 858 | 1,008 | 1,238 |
| PAT | 514 | 515 | 594 |
Comment: Revenue compounding is sharp; profits are catching up despite rising costs.
Peer Comparison
| Company | Revenue (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| eClerx | 3,519 | 570 | 32 |
| Hinduja Global | 4,404 | -118 | NA |
| One Point One | 256 | 33 | 39 |
| FSL | 8,407 | 629 | 40 |
Comment: FSL leads in scale, but trades at a premium P/E – justified only if growth continues.
Miscellaneous – Shareholding, Promoters
- Promoter Holding: 53.66% (stable)
- FIIs: 9.6%
- DIIs: 24% (increasing stake)
- Public: 11.9%
- Buzz: Shifted registered office, completed UK acquisition – expansion mode ON.
EduInvesting Verdict™ (500 words)
Firstsource Solutions has successfully evolved from a back-office BPO to a digital-first BPM leader. Backed by RP-Sanjiv Goenka, it has global presence, diversified sectors, and an enviable client roster. The company’s Q1 FY26 performance reflects robust execution, margin stability, and a clear growth roadmap.
Strengths:
- Diversified service verticals.
- Strong parent support.
- Consistent cash generation and dividend payouts.
Weaknesses:
- High debt due to acquisitions.
- Margins still below IT service giants.
- AI poses an existential challenge to parts of BPO.
Opportunities:
- Expansion in BFSI and healthcare outsourcing.
- Automation to drive efficiency.
- Rising demand for digital CX solutions.
Threats:
- Intense competition from IT services and AI automation.
- Currency volatility, given large overseas exposure.
Final Word: At ₹335, FSL looks like a solid mid-cap play in BPM with growth visibility. If management keeps balancing debt vs. expansion, this BPO could become a multi-bagger in disguise. For now, it’s a growth story worth watching, not shorting.
Written by EduInvesting Team | 30 July 2025
SEO Tags: Firstsource Solutions, BPM, BPO Stocks, RP-Sanjiv Goenka Group
